One of the largest financial decisions a person will make during their lifetime is what to do with their retirement savings when they retire. I have heard many horror stories from folks over the years who have made wrong decisions. The stories often revolve around someone convincing them to buy a complicated and costly financial product. On the program this week, I spend time going through a framework to develop a good decision making process.
Too often, people will immediately be talked into rolling or transferring their monies out of a retirement plan before comparing it to the proposed solution. In other cases, a lack of disclosure or too much faith in the salesperson dooms the transaction and/or the relationship.
The concept of “money in motion” has been taught to financial salespeople for generations. That is, focus on people who are at or near a lifetime event to gather assets. They will be more vulnerable and responsive to sales pitches when they are facing a big decision. It all makes sense, but too often these trolling for dollars safaris end up hurting real people. I have seen many inexperienced or unscrupulous salespeople sell costly financial products that appear to benefit them more than their clients.
On the program this week, I spend time walking through some of the issues that folks face as they get close to retirement and what they should do with their retirement savings. I hope you enjoy the program this week. – Gary
If you have a question or would like to contact Gary, the best way is through Gary’s Email at email@example.com. You can always try to call him as well 916.436.8331.
I often hear about the good old days when everyone in the land had a pension that lasted a lifetime. These good old days come up when people complain about 401(k) plans and how they have failed America. However, were the good old days really that good? I don’t profess to have all the answers, but this memory of the good old days seems to be a bit hazy at best.
First of all, only about half of American workers were covered by pensions. This is hardly comforting to the other half that did not have a pension. And on top of that, just how secure are those old pensions? The answer right now is a big shakier than many remember. Those old pensions are still the same pensions we are living with today.
The reality is many of those pensions are significantly underfunded. The problem of under-funding is present in public and private pension systems. And the scary thing is the PBGC, which is the safety net behind pensions is also running out of money.
In the first segment of the program, I cover the current health of the pension system in the United States. Don’t worry, it can be fixed, but it is going to take a lot of effort and sacrifice.
In segment two, I cover the exciting topic of the fine print. Investment disclosures are something that everyone struggles with. There have been many attempts at trying to develop more effective and simpler disclosures but it does not seem to matter. For whatever reason, disclosures appear to contain some kind of fatal dose of Kryptonite that renders investors oblivious to the risks involved. Unfortunately, I don’t have any simple answer to fix this problem. Caveat emptor still reigns supreme when it comes to purchasing investments.
In segment three, I respond to an excellent question from podcast listener Randy. He had a great question about when is it appropriate to invest in a stable value fund. Most listeners know, I am not a fan of stable value funds, but sometimes you don’t have much choice.
Finally, in segment four, in the remaining time I have, I cover some of the issues or problems that I see with stable value funds. The perceived safety and guarantee of stable value funds make them very attractive to retirement plan participants. It is my opinion that most people would do better if they did not commit their savings to these high cost, low return vehicles.
It was the dreaded spring-forward Daylight Savings Time weekend… so I know many of you may have missed the broadcast. That’s why we have this podcast. I hope you enjoy the program – Gary
If you have a question for Gary or would like to chat with him, the best way is to contact him through email.Gary’s Email firstname.lastname@example.org.
If you are not the emailing type, you can always try to reach him via telephone at 916.436.8331.
Most people know about 529 College Savings Accounts but few are aware of the new exciting changes under code section 529A. Passed in 2014, the Stephen Beck Jr., Achieving a Better Life Experience Act of 2014 is the single biggest improvement for the financial future of disabled people in a very long time.
Until the passage of the ABLE act most disabled individuals have been trapped in a life of government imposed poverty. Unfortunately, disabled people have been limited to financial assets of less than $2,000 or they would lose their government benefits. All of that is about to change with ABLE accounts.
Listen to the highlights of the exciting ABLE accounts program on this week’s program. The great news is disabled people will be allowed to have modest financial wealth and retain their government benefits. Wonderful news for the disabled community and their families.
Fiduciary Standard Versus Suitability Standard of Care
A recent interaction with an intern from a financial services firm on the east coast crystallizes the difference between being a fiduciary and a salesperson. This short segment is a great lesson in understanding the differences between a professional and a salesperson in the financial services industry.
The All-Weather Portfolio and Goals-Based Investing
The final segment of the program introduces the concept of an all weather portfolio and focusing on your needs or goals. It is a change in thought process from the usual product driven/returns driven investment mindset.
Contact Information – Gary Allen
If you have a question for Gary or would like to contact him, the best way is through email at email@example.com. You can also try his office at 916.436.8331 but he responds more quickly through email.
I have had a number of requests from people about the recent interview with Costco co-founder and ex-CEO Jim Sinegal. While the interview with Jim is included in the podcast from the show on Sunday, July 31, 2016 (segment 3), below you will find a podcast of only that segment. That should make it easier for anyone trying to find the interview with Jim.
It was a real pleasure to have the interview with Jim Sinegal who does not often provide interviews these days. Thanks to the folks at The Organic Coup for arranging the visit with Jim. The interview contains some excellent advice and observations for entrepreneurs and employees alike.
Podcast of Jim Sinegal Interview
Gary Allen on Business – KNBR 680 AM San Francisco, Original Broadcast on Sunday, July 31, 2016
On the program this week an interesting story about a new startup in the fast food industry. The Organic Coup is America’s first certified organic fast food restaurant. The mission is a big one, in fact a revolution in the fast food industry. The upstart promises fast, healthy, organic food that promises to reinvent the concept of fast food.
The driving force behind the company are two former Costco executives without restaurant experience. However, Erica Welton is a well-known executive considered to be one of the most influential organic food individuals in the country. Erica was at the center of turning Costco into the world’s largest organic retailer. Her partner is long-time Costco executive Dennis Hoover.
The two represent an excellent partnership between Welton’s vision for the company and Hoover’s deep operational experience running Costco’s crucial Northern California region for many years.
While the two do not have direct restaurant experience, it is easy to see in the interview that Costco’s passion for excellence, quality and efficiency are key factors in the startup. In addition, the organic supply chain relationships developed by Welton are crucial for the company’s ability to scale up from its current three locations to as many as ten by the end of the year.Many more company owned restaurants are planned over the next few years.
The combination of clean, healthy, fresh food with the efficiency of Costco and an aspiration to match In-N-Out Burger’s service could be a disruptive force in the fast food industry. Only time will tell if Welton and Hoover with their team can scale and execute on the mission, but so far so good.
On a personal note, everyone (including me) at KNBR 680 & 1050, KGO 810, KSFO 560 and 107.7 the Bone who tried their signature organic fried chicken sandwich gave it a big thumbs up. That is a huge endorsement since radio stations live on fast food 24/7.
Jim Sinegal – Former CEO and Co-Founder of Costco
It was a real coup (pun intended) to have Jim Sinegal of Costco fame call into the program to talk about his business experiences and his connection to The Organic Coup. The retailing legend offers some excellent advice to business owners and employees in segment three of the program.
The company currently has three locations (Pleasanton, San Francisco, Pleasant Hill) with more to come in the near future. You can find more information about The Organic Coup at www.theorganiccoup.com.
CONTACT INFORMATION – Gary Allen
If you would like to contact Gary or have a question for him email is the best method. His email address is firstname.lastname@example.org or you can try to contact him at 916.436.8331.
Monetary and Fiscal Policy… Helping the Economy or Slowly Drowning it?
In the first segment of the program this week I talk about the potential impact of the unprecedented use of monetary policy to support global economies. How does it impact the global economy and what impact does it have on the average consumer?
In segment two, I provide my experiences with Uber as I travel on business around the country. I use Uber as a good example of how a disruptive technology/business model has upended the somewhat monopolistic stranglehold that traditional cab companies had on transportation.
What is often overlooked is how lower costs, more supply and competition has actually increased demand and improved the level of service. Another overlooked reality is how the average cost of licensing a cab adds $30,000 to $50,000 per year that is passed on to the consumer. Uber and its ride sharing competitors can offer lower prices because the licensing structure in place for traditional transportation companies is avoided. The cost of a taxi medallion to operate in NYC has for many years has been about $1 million. Uber and other ride sharing drivers do not have this requirement.
In segments three and four, the focus is turned to retirement vehicles. The segment covers some of the differences regarding pretax and after-tax considerations. The idea is to give you a better understanding of where to save rather than what to invest in.
As always, I hope you enjoy the program.Thank you for listening to my program on KNBR. – Gary
Costs Matter – The Impact of Fees on Your Retirement
Hidden or in plan sight, fees can have a big impact on retirement
People have spent eternity trying to outguess or outsmart financial markets. Another way of looking at this is to understand that people are trying to control financial markets. However, financial markets are dynamic and resist control at any level. Ultimately, this is a fool’s errand.
Conversely, controlling costs is something that can and should be done. On this program, I run through a study we recently prepared for a company. While simple, it shows the individual and cumulative damage that higher and unnecessary fees inflict on retirement investors.
In the study, the impact on a small retirement plan of $5 million dollars over two decades is striking. While numbers can sometimes be hard for people to comprehend, the resulting impact changes people’s lives for the worse. By controlling costs and paying only necessary fees, it is possible for employers to have a large positive impact on their own employees.
Later in the program, I discuss the three factors that people can use to impact their own retirement:
Funding (wish I could change this)
The timing of your retirement
Change the way you invest
These three factors can have a positive or negative influence on your retirement. Since they are under your control or influence these are the items you should spend time on rather than worrying about trying to outsmart financial markets.
As always, thank you for listening to my program on KNBR 680. If you have questions or concerns about your own investments or would like us to review what you are doing, please contact Gary.
The best way to contact Gary is through email at email@example.com. But you can try to reach him by phone as well at 916.436.8331.
California Employers Facing State Mandated Retirement Program
So far it has remained under the radar, but a major new State government program is rapidly heading towards a collision course with private employers in California. The California Secure Choice Act is a program that states private employers must offer a retirement plan to their employees or the employer will be forced to participate in a new retirement program mandated by the State of California.
California employers with five or more employees must comply with the mandate or face heavy penalties if they do not. Critics of the state program, including myself, have identified numerous issues small and large that plague the offering. My personal opinion is employers face significant potential risk (based on the current version of the regulations (5/22/2016). Further, the program in my opinion, falls short on providing an optimal solution for employees as well. The program design is flawed and incomplete leaving many questions unanswered.
Currently, Secure Choice is on track for a 2017 debut, but could slip into 2018. However, make no mistake about it, this program is coming soon. And even if you do offer a retirement plan to your employees that may not exempt you from the mandate. The State is working on rules that would mandate coverage for part-time or contract workers that are excluded from your existing plan.
There is a much simpler solution for employers to avoid the California Secure Choice Act. Employers can offer a payroll deduction IRA program to their employees without cost or personal liability to the business or its owners. Payroll deduction IRAs have been around for decades and work very well for employers of any size. You can provide your employees with a simple and effective way to save for retirement without cost to you.
I am very concerned that the California Secure Choice Savings Program will turn out to be the equivalent of the Affordable Care Act (ACA) for retirement plans. You can avoid the headaches and the uncertainty by offering a private solution today.
You can listen to more about the California Secure Choice Act in segments three and four of my show this week.
In segments one and two of the program, I discuss the flaw of retirement planning that focuses on building wealth instead of a stream of income for retirement.
Jim Cramer of Mad Money fame on CNBC has popularized fame with his fast paced show that has its roots in the production values of the Jerry Springer show. You may laugh, but Cramer’s Mad Money show is the brainchild of Susan Krakower, the former producer of the over the top Jerry Springer show. If you think about Springer, sports talk radio and a touch of a traditional financial show, you have the secret sauce that became Mad Money.
The show has seen a ratings decline in recent years but the frenetic energy remains. Adding some spice, this weekend a new movie titled Money Monster starring George Clooney has opened across America. But the focus of my story on the show this week is a research report that also was released on Friday. That report from researchers at the Wharton School of Business look into the track record of Cramer’s stock picks.
It may come as a surprise to some, but I was not caught off guard by the results of the research report. Bottom line, Cramer has not done well compared to the S&P 500 with his charitable fund. While Cramer is just one example, he is the poster child for “smart” active management. At this point the numbers are in and Cramer like most of his peers trail the returns of the stock market.
The Living Wage Movement For A Few
Everywhere you turn these days, people are protesting for a living wage. Currently, the living wage benchmark according to the protestors and their supports is $15 per hour. However, the part of the story that most protestors are missing is who will be left working once $15 per hour becomes reality.
Fast food workers are some of the primary protestors pressuring employers to raise the minimum wage to $15. Too often companies are vilified for underpaying their workers and having profits that are too large. Are there companies that take advantage of their workers, of course, but I never remember anyone until now talking about a fast food job being a place to work to support a family of four.
Fast food jobs and most retail jobs have traditionally been entry level positions for young and or unskilled workers to enter the workforce. In my opinion, the majority of the workers currently protesting for $15 per hour will be worse off if they achieve their goal. The reason is simple, automation will replace most of the jobs and they will be unemployed. A fraction of the current workers will be left earning $15 per hour watching customers order and pay for their own meals at self-service kiosks, while a couple folks will be left in the back feeding machines that prepare most of the food. Wendy’s this week became the first major fast food chain that said it will install these kiosks this year at all of its locations.
The problem is not $15 per hour for entry level jobs. The problem is too many low or unskilled workers who do not have access to training or education opportunities to improve themselves.
Gary Allen on Business – Sunday, May 15, 2016 – Podcast
The Cramer story and $15 for the few highlight the show this week. Hope you enjoy the podcast. – Gary
If you would like to contact Gary, the best way is through email at firstname.lastname@example.org. Or you can try to reach him at his office at 916.436.8331.
Communication is such an important thing. Countless books have been written about the subject yet we still struggle to communicate with one another. In the world of financial services, some miscommunication is unintended while some happens to be on purpose. It is hard to question the advice or the validity of an investment strategy when you cannot understand it. The real trick is to know when someone is struggling to communicate with you or if they are purposely trying to talk circles around you. The first is irritating and CAN cost you a lot of money, while the second WILL cost you a lot of money!
I spend some time on the program trying to translate financial speak into common sense. It is hard to translate but well worth it. The difference can mean thousands of extra dollars in your pocket instead of in the pocket of the person trying to sell you a product.
The Active Management/Passive Management Debate (Case Closed)
Later in the program, I provide the basic facts of how active management fails to deliver on its promise of beating the market. I still wonder why so many people believe in the Wall Street Santa Claus of superior performance when study after shows that the Grinch is alive and well in the canyons of Manhattan.
As always I hope you enjoy the show. – Gary
If you would like to contact Gary the best way is through email at email@example.com or you can try him at 916.436.8331.